The long-term objective of this project is to create new bone graft materials based on the directed differentiation of adult human mesenchymal stem cells (hMSC) in defined three-dimensional (3D) microenvironments, which can be delivered as a paste directly to the site of bone repair. hMSC are a promising autogenous cell source for bone tissue engineering because of their demonstrated ability to proliferate, as well as to clearly differentiate into the osteogenic lineage. A main factor limiting their use in bone repair is the inability to reliably control the induction and maintenance of osteogenic differentiation. This project directly addresses this issue by carefully controlling the extracellular environment immediately surrounding hMSC, by embedding them in protein hydrogel beads (20-200 um in diameter) of defined extracellular matrix (ECM) and growth factor composition. The central hypothesis is that hMSC differentiation can be directed through structural and compositional changes in the cellular microenvironment. The combination of specific integrin binding to natural ECM proteins and highly efficient, local delivery of growth factors in a 3D microenvironment is expected to provide a potent stimulus for osteogenic differentiation of hMSC. The Specific Aims of this project are to: 1] identify 3D extracellular microenvironment formulations that consistently promote differentiation of hMSC towards the osteogenic phenotype, 2] augment the extracellular microenvironment with BMP-2, a growth factor known to have potent osteoinductive effects, 3] adapt the use of defined cellular microenvironments to high density culture, and test them as an injectable cell delivery system in vitro, and 4] test 3D matrix-embedded hMSC in vivo in a segmental defect model in immunodeficient rats. The approach of creating defined 3D bead microenvironments addresses four key elements that are critical to effective bone repair: i] the presence of living osteogenic cells (hMSC), ii] an osteoinductive scaffold (the natural ECM proteins collagen I and vitronectin), iii] osteoinductive growth factors to provide signals to the resident cells (BMP-2), and iv] an adequate blood supply to support cell growth and function (by providing void spaces between beads for vascular ingrowth and VEGF delivery in vivo). This project is aimed at clinical problems that can benefit from therapies that accelerate bone healing in a difficult environment, such as avascular necrosis, spinal fusion and implant fixation. It will yield fundamental knowledge of how hMSC phenotype can be controlled by the 3D extracellular environment, and will therefore have broad impact on regenerative medicine. In the field of orthopaedic tissue engineering, it will yield a new cell-based bone repair therapy.